Of course Deliveroo's losing money

But will that make it drag its heels over gig workers' rights?

by Adam Gale

Published: 21 Sep 2017

Last Updated: 21 Sep 2017

Accounts filed by Deliveroo’s parent company have revealed a spiralling loss as the start-up expands. In 2016, Roofoods lost £129m, compared to £30m the year before. It’s been noted that the market-making restaurant delivery start-up is also operating on microscopic margins, with cost of sales reaching more than 99% of its total revenues of £128m.

None of this should surprise anyone. It’s an expanding start-up – of course it’s not making a profit, it’s in a pavement-slamming sprint to grow. The more interesting question is what this means for the gig economy. It’s all very well, after all, demanding rights or ‘good work’ for gigging Deliveroo riders, but such things cost money, and Deliveroo isn’t making any.

Of course, that’s not to say it’s exactly strapped for cash. The firm raised over £200m last year. Conceding on gig workers’ rights would not be financially impossible for Deliveroo, or indeed Uber and various others. So what would it mean?

Deliveroo’s costs of sales would rise. This means either it would have to expand more slowly (leaving it vulnerable to faster-moving competitors) or it would incur a larger loss. Its investors would one way or another be paying more for less reward. This means they would demand more equity to open their purses again, which the firm will undoubtedly require at some point. None of that looks particularly appetising for a rising tech entrepreneur or their backers.

This is not to say that the gig platforms are being insincere when they talk about offering workers flexibility and a fair deal (indeed, Deliveroo has said it would provide sick pay and other benefits if the law changed), but it does mean you shouldn’t expect meaningful reform to come from the businesses themselves.

Even once the start-ups reach the holy grail of scale and profitability, there’s no guarantee things will change. After all, plenty of very large, very profitable companies go to enormous lengths to structure themselves in a tax-friendly way – why would you expect them to behave differently with labour costs?

The issue of gig worker vs self-employed vs employee rights is only likely to be settled at a legal and regulatory level, which puts the onus on the platform businesses to make their case. Ultimately, it’s in everyone’s interests that this complex issue is clarified, and fast. If only there were an app for that.